Bill Watkins: Building a new market for a unique product

Long-time technology executive and entrepreneur Bill Watkins re-joined the startup world as chief executive officer of LED lighting company Bridgelux after departing storage kingpin Seagate in 2009. Shortly after his arrival, he invested millions into building a new type of light bulb that has been long imagined by scientists and engineers, but never actually realized. Watkins—who recently appointed a successor CEO, but remains at the company as chairman— pulled off what once seemed impossible. He and his team developed a silicon-based LED that could one day save billions in energy costs. But before that can happen, Bridgelux needs to make a new market for an innovative product by changing the way we think about lights. Step one, Watkins says, is breaking the old rules.

When you took over Bridgelux in 2010, the company was treading water at best. How did you set a new course?

When I joined, I said, “I want to take every dollar we have and put it into research and development to become a technology leader. And then we’re going to find a manufacturing partner.” So that was our strategy: get the tech right first and don’t spend anything on manufacturing. Last year I had $60 million in revenue and I spent $42 million in R&D. For a startup venture, that’s a hard nut to swallow, but that’s what we did.

You set out to create something that had been deemed impossible for two decades—a new form of LED known as GaN-on-Silicon. What gave you the sense that the time was right?

When I asked, “Why can’t we put it all on silicon?,” my team explained something about a mismatch of materials and the cracking that occurs when you try to put an LED on silicon. My response was, “You’re telling me we can’t do it because it’s hard to do.” I knew that if we could make silicon work, it would strip out 60 percent of my costs, allow me to manufacture on eight-inch wafers, and allow me to embed communication chips into the LEDs, motion sensors, all kinds of stuff. So I looked at that opportunity and decided that it was just a matter of hard work. I put every engineer I could get my hands on into developing trial after trial after trial until we got a big breakthrough. And all of a sudden we found a recipe that solved the mismatch problem.

How do you build a market for something that’s truly innovative and unique? We’re used to thinking about our light bulbs as simple, functional objects—if we think about them at all.

You’re right. The old school lighting guys, they don’t want you to think about light. They want to build a light that’s cheap. You put it in the socket and you don’t think about it again until it’s time to replace it. We want the opposite. Bridgelux is in the business of driving light innovation, so I’ve got to give you a reason to buy my light bulb and pay me more for it. The first big opportunity is around energy. I need to show that my product saves so much energy that it makes sense to pay more for it. Then over time, I need to demonstrate how I’m adding functionality. At some point, this product will look like a system on a chip. It’ll sense the environment. It could have a TV camera, a baby monitor, all sorts of things. Think about what happened with phones. Once upon a time, AT&T provided your phone, and you had a choice of the beige one or the blue one. You didn’t think about the phone. It always worked. But we’re telling you there’s a reason to change your light bulb and it’s the same reason you threw away your old phone—because there’s something better.

Why lead with a cost-savings message? Apple never talks about cost savings with the latest iPhone.

Remember that we didn’t go right to an iPhone. In 1995, you wouldn’t have paid a thousand dollars for a smartphone. There would have been no way to use it because the infrastructure wasn’t there. So you have to get people to use a cheap phone first. Over time, you move them along to a more intelligent phone with more capabilities. So we’re getting people to convert to LEDs from antiquated lighting technologies by centering our messaging on energy savings.

What do you expect from your marketing team?

Two things. Data and ideas about how we’re going to differentiate ourselves. We’re not going to be successful being your father’s lighting company. The world does not need another Philips or GE. What the world needs is somebody who’s going to break all the rules. I tell them, “Look, we’re spending our venture capitalists’ money, and if we fail, we fail. But let’s fail trying to change the world.” Once you get everyone thinking that way, it’s kind of empowering. You just go out and try every weird idea you can think of. For me, marketing is not just about touting the innovations happening at Bridgelux. You’ve got to think about your company’s strategy. I want my marketing team to break rules.

Such as?

There are a bunch of rules in this industry that have become sacrosanct. No one partners. No one provides financing. No one innovates. Did you know that most lighting customers still buy their systems and equipment from paper catalogs? We decided not to sell our products that way because the people who use those catalogs aren’t the same type of buyer who is going to take a chance on us. So the job becomes more about finding the customer who likes our big idea and is willing to be radical with us.

How do you do that?

I started by looking at the markets that had double hits in energy. If you’re a supermarket, for example, you have to refrigerate all this food. So you’re paying for air conditioning, but also paying to light the place, which generates heat. Because we’re a cooler light, we allow you to reduce the air conditioning costs, providing phenomenal savings real fast. So we used that observation and developed a specific refrigeration light. In marketing, we identified all the markets similar to that model and we went in with a customized solution. Sometimes that solution is less of a product than a business model. With street lights, for example, we partnered with Chevron to develop a financing strategy for customers. This got us thinking about how we can develop annuity streams off our light bulbs.

How did you build a team capable of thinking that way?

We recruited people who didn’t know anything about lighting, but knew a lot about innovation and how to launch new products. We wanted people who don’t think like the lighting guys think. This goes back to the old argument about why RCA was never going to invent the iPod. It was never in their mind or their culture. They were always trying to make a better record player.

What role does data play for a team that has no real knowledge of a sector, much less a market that they’re trying to create?

You need as much data as you can get your hands on. You want to know the market trends, the market costs, who’s doing what, your competitors’ costs. We crunched a lot of data about the energy expenditure of streetlights and that’s what enabled us to come up with an argument for why it makes economic sense for every city to replace their bulbs with LEDs right now. When we go talk to people, we take that type of data with us. In some ways, the data is even more important than the product itself. One of the things I learned from my early days at small startups: You sell it, then you design it, then you build it. As a small company, you cannot afford to build something and then figure out a market for it. That’s big-company thinking. As a small company, you go find a customer. You sell your idea. Then you figure a way to design and build it. That’s the way you have to do it because you because you can’t afford the inventory.

You’re saying that a lack of resources can actually be an advantage?

To really innovate as a big company, you’ve got to be able to kill your business and morph into something new. That’s not easy. Often you’ll see corporations get themselves in trouble when they don’t spend on R&D because it doesn’t grow revenue and profitability. Instead, they try to manage a transition to a new technology. Ultimately that keeps them from owning new opportunities because, meanwhile, we’re running a thousand miles an hour toward the future and spending everything we have on R&D to make sure we have the technology right and that we get there first. Right now, there is no LED brand. When you think of LEDs, you don’t think of anybody, and we think that’s because none of the big lighting players can afford to remake themselves toward that future. There’s a great opportunity for us.

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